The Internet and Mobile Association of India, in its pre-budget expectations, has asked the government to incentivise start-ups and domestic venture capital.Neha Alawadhi | ET Bureau | January 12, 2016, 08:01 IST

The Internet and Mobile Association of India, in its pre-budget expectations, has asked the government to incentivise start-ups and domestic venture capital through fiscal interventions in order to boost investment and encourage new businesses.The Internet and Mobile Association of India, in its pre-budget expectations, has asked the government to incentivise startups and domestic venture capital through fiscal interventions in order to boost investment and encourage new businesses.

"The association suggests that there should be tax breaks and incentives for individuals supporting startups with capital," said IAMAI in a statement, adding that the criteria to qualify as an angel fund looking to invest domestically are stringent and need to be eased.

On the contentious issue of taxation of e-commerce marketplaces startups, IAMAI suggests that they be recognised as marketplaces and exempted from value-added tax demands in states.

"As market places they provide a service to online sellers and pay the service tax on that account. The State of Rajasthan for example treats e-commerce players as marketplaces," said IAMAI.

In particular, it has asked that payments made for storage of computer data on servers, website hosting charges, data retrieval, access to online database and online advertisement not be subject to tax holding in the country.

The association, which counts Facebook, LinkedIn, Google and Microsoft as members, also suggested that service tax be waived off for the first three years of a startups operations if it is paying its taxes on time.

Apart from multinational companies, IAMAI also counts a host of online businesses as its members, including Freecharge, Hike, Quikr, Snapdeal.

It further asked that different types of financial technology startups providing services such as pre-paid instruments and wallets be provided more clarity on the rules and policy front on the peer-to-peer lending issue by the government so that they are able to reach a wider customer base.

IAMAI said that digital payment startups such as those providing pre-paid instruments, wallets and others use easy know-your-customer (KYC) mechanisms through Aadhaar, so that they are able to "build new services which in turn will help bring more people under the ambit of financial services".

In a memo, it detailed the key policy issues impacting the startup sector, including FDI policy, ease of unfriendly state tax regimes, VAT liabilities and local body taxes.